Unless Congress and the President act to stop a dividend tax hike, the maximum tax rate on dividends will almost triple. Such a dramatic and sudden increase, many argue, would cause investors to retreat from dividend-paying stocks in favor of other investments. Millions of Americans—from all income levels and age groups—who directly own stocks that pay dividends will be affected. Seniors and people reaching retirement age, in particular, represent a large portion of investors who own and depend on such stocks. Millions more Americans own stocks indirectly through mutual funds; and dividends support the value of stocks held in life insurance policies, employer or union pension funds, 401(k) plans, and individual retirement accounts.
Jim McCrery points to statistics demonstrating that lower dividend tax rates also benefit the American economy: They help spur the growth needed to create new jobs. McCrery, a former Republican congressman from Louisiana and currently a partner at Capitol Counsel, LLC, and manager of the Alliance for Savings and Investment, helped craft the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003—the laws that enacted the so-called Bush tax cuts, which cut the top dividend and capital gains tax rates to 15 percent. Keeping tax rates low for dividends and on a par with rates for capital gains was a great idea then, McCrery says, and a necessity now. We spoke with him in his office in Washington, DC.